GM: Needs $4B in December to stay afloat

Robert Snell / The Detroit News

DETROIT -- General Motors Corp. needs more money from Congress than it previously disclosed and needs it sooner or risks being unable to survive into next year.

The dire revelations were contained in a restructuring plan GM submitted to Congress on Tuesday to support its request for up to $18 billion in federal aid -- $6 billion more than the company said it needed last month.

GM had said it was in danger of falling below minimum levels of cash needed to pay bills in early 2009. Now, the company needs $4 billion immediately to meet its obligations through the end of the year.

"Absent support, frankly, the company cannot fund its operations," Chief Operating Officer Fritz Henderson said Tuesday.

GM's plan outlines a strategy to make money on its car business on a pre-tax basis by 2011 and break even overall by 2012, assuming a rebound in U.S. auto sales to between 12.5 million and 13 million vehicles annually. In November, the rate was 10.18 million, about six million fewer vehicles than a year ago.

The plan details cuts that otherwise would be accomplished by filing for bankruptcy. GM would eliminate up to 31,000 jobs, shut nine plants and renegotiate its 2007 labor contract with the United Auto Workers.

The plan also calls for ending corporate jet travel, paying CEO Rick Wagoner a $1 a year salary, closing 1,750 dealers and selling the Saab brand, shrinking Pontiac and talking to dealers about the future of Saturn. GM already is trying to sell its Hummer brand. GM also will talk to banks and bond holders about swapping some of the company's debt for equity.

The actions are aimed at transforming one of America's most storied companies, and a key economic engine, into a leaner, profitable business.

The plan would help the automaker survive the lowest per-capita sales level since World War II and create "really a new GM," Wagoner said Tuesday.

The plan details how the automaker would spend the federal money and repay taxpayers by 2012. GM is burning through cash rapidly and has lost almost $73 billion in the last four years despite several restructurings, the most recent of which was undermined by the Wall Street crisis, lack of credit, unemployment and low consumer confidence.Wagoner said this restructuring plan is different because the cuts and structural changes would allow GM to be profitable even if annualized industry sales remain far below 2007 levels.

GM is asking for $18 billion, which includes a $12 billion loan and a $6 billion line of credit that would be tapped if the market downturn persists.

The automaker would make several withdrawals of the cash in coming months. In addition to the $4 billion in immediate aid, GM would draw $4 billion in January.

GM would make a $2 billion withdrawal in February or March for a total of $10 billion. In all, the $12 billion loan would help ensure GM has enough cash to pay its bills through 2009.

The automaker supports creating a federal oversight board that would ensure GM's restructuring goals are met and that the taxpayers' investment is "fully protected," Henderson said. The government would get stock at a certain price and if the value increases, shares could be sold at a profit.

Whether the plan will be enough to win congressional support remains to be seen. Analyst Aaron Bragman of IHS Global Insight said it looks more like a continuation of existing turnaround plans, which were working, than a sweeping restructuring.

"I am not sure it goes far enough to address what Congress' concerns may be," he said.

GM's plan includes:

• Slashing hourly costs in North America by $3.6 billion to make GM competitive with foreign automakers no later than 2012.

That will mean negotiating with the UAW to change job security provisions, paid time off and other issues, including GM's obligations to a UAW-run retiree health-care trust fund.

GM has 96,000 salaried and hourly workers and the goal is to have 65,000 to 75,000 workers by 2012.

GM wants to replace more hourly workers with lower-paid workers. GM negotiated a two-tier wage system with the UAW last year that pays new hires in non-core positions about half what current workers earn with no pensions and dramatic cuts to their health care coverage.

By 2012, GM proposes slashing its structural costs to $23.2 billion, about a $7 billion reduction.

• Reducing or eliminating four of its eight brands, building fewer models and cutting the number of dealers.

"Pontiac will be more of a high-value performance brand, like Corvette to Chevrolet," said Mark LaNeve, GM's North American vice president of sales.

Henderson would not speculate about what might happen to the Saturn brand, where sales are down 20.9 percent this year.

The uncertainty about Saturn gives anxious buyers another reason to skip the showroom, said John Java, co-owner of two dealerships in Texas and Louisiana.

"Leaving us in purgatory is not a real attractive option," Java said. The moves would let GM focus on four core brands: Chevrolet, Cadillac, Buick and GMC, which account for 83 percent of sales.

• Cutting executive compensation and eliminating its corporate aircraft fleet.

Wagoner will take a $1 salary next year, and the top four senior executives will see their cash compensation cut about 50 percent.

Neither Wagoner nor top executives will receive bonuses this year or in 2009.

Wagoner already has seen his compensation cut in recent years and has not gotten a bonus in three of the last four years.

Henderson, who was paid $1.9 million last year, will take a 30 percent cut in salary while three other top executives -- Vice Chairman Bob Lutz, Chief Financial Officer Ray Young and Tom Stephens, executive vice president of GM power train and global quality -- will take 20 percent cuts.

GM also announced it is closing its aircraft operations at Detroit Metropolitan Airport and getting rid of its airplanes.

You can reach Robert Snell at (313) 222-2028.